Archive for month: May, 2017

Coming soon, 11-month rent agreement in Tamil Nadu

Image used for representational purpose.

CHENNAI: Your rental agreement is set to undergo a sea change after Tamil Nadu implements the Centre’s Model Tenancy Act. Changes include the mandatory registration of all rental agreements over 11 months in period or `50,000 in value, advance amount to be limited to three months and tenant’s right to continue possession of the property after lease period to be limited to six months.

The rental agreements now cite the more than five-decade-old Tamil Nadu Building (Lease and Rent) Control Act, 1960, which will change once the new Act is brought in. As land — and thus rent — is a State subject, the central Act is a draft; it is up to individual States to adopt it. However, by making it a mandatory condition for obtaining funds for ‘Housing for All’ Mission under the Pradhan Mantri Awas Yojana, the Centre has managed to convince States, including Tamil Nadu to come on board.
The new Act has some key changes when compared to the existing State Act. Under the Model Tenancy Act, it is mandatory that all rental agreements that have a period exceeding 11 months or are valued at over `50,000 must be registered with the Registration Department under the provisions of Indian Registration Act.

The new Act is considered to be more beneficial for the landlords. Under the old Rent Control Act, there was no tenure for tenancy and evicting a tenant was highly restrictive. Previously, the stress was on the tenant’s right to occupation. However, in the new legislation, this right to possession is limited to only six months after the lease period.
This would prevent the misuse, including usurpation of property, of the earlier Act, said sources. Officials point out there are several cases where tenants refuse to vacate the premises, which then become aged, ill-maintained, and on the verge of crashing.

In another feature, if the landlord takes possession of the premises to undertake repair or reconstruction, the re-entry of the tenant is on the basis of a mutually-agreed new tenancy agreement. Earlier, the premises had to be offered to the same tenant.
Also, the new Act has the provision to renew rent at periodic intervals.
In one of the features advantageous for tenants, the new Act restricts the advance amount that landlords can collect up to three months’ rent. However, it is another matter that this is decided arbitrarily by the landlord, with some charging as much as 12 months’ rent as advance. Though the old Act limits advance to just one month, it is at least three months’ rent at all metros and other cities in India.

The earlier Act which was passed to regulate rents also gave powers to the government to take properties on fair rent, even against the wish of the property owner, if it was in the interest of the State. But senior officials feel the provisions are outdated for the present scenario, where a robust real estate sector is now supplying sufficient housing stock.
A big challenge for the regulator was to calculate ‘fair rent’ to be charged by the landlord. The fixing of rent depends on the land value, and there was a chance that it could be exploited by the landlord by charging exorbitant rent. The new Act will regulate rent as per the contract and safeguard tenants from extreme escalation due to rise in land value.

Sources indicated that all provisions of the Model Tenancy Act have to be covered by the lease agreement to be entered between the landlord and the tenant.
Meanwhile, the rent courts functioning under the provisions of Tamil Nadu Buildings (Lease and Rent control) Act, 1960, may be continued in the Model Tenancy Act, too, by re-designating them to function under the new act in order to save the loss of revenue to the government.

New rules under RERA or the Real Estate (Regulation and Development) Act are applicable to residential and commercial development. Under RERA, realty developers and agents have to register with respective state regulatory authorities

New rules under RERA or the Real Estate (Regulation and Development) Act to regulate the real estate sector, protect home buyers and ensure the timely execution of projects with an aim to boost investor confidence and stamp out illegal practices will apply from today. They are applicable to residential and commercial development and make it mandatory for all projects and brokers to be registered with the real estate regulator who will oversee transactions and settle disputes. Only seven states have, however, moved to implement the new rules as yet.

Here’s your 10-point cheat-sheet:

RERA is a model law, which means the Centre can recommend it but it is up to the states to formulate and pass their own laws, since land is a state subject.

Till last weekend, only six states had notified the rules – Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar. The Housing Ministry had last year notified the rules for the five Union Territories and for the National Capital Region of Delhi.

The Centre has described RERA as the beginning of a new era where the consumer will be king. Union housing minister Venkaiah Naidu said rights and obligations of buyers, developers and real estate agents are clearly defined in the Act and any aggrieved party can seek redressal for violation of terms of agreement by the other party.

On reports that some states have diluted key provisions of RERA, Mr Naidu said that the states have assured his ministry that these will be corrected.

Under RERA, real estate developers and agents have to register with their respective state regulatory authorities by July 30. They must also deposit 70 per cent of the funds collected from buyers in a separate bank account to be used only for the construction of the project, to ensure timely development. New projects must have all approvals before launch.

Promoters must have the consent of two-thirds of the buyers in a project before making any change in the number of units or other structural changes. RERA prescribes penalties, including imprisonment on developers who delay projects or do not deliver on promises. Developers are required to disclose their project details on the real estate regulator’s website, and provide updates on construction progress.

RERA also states that any structural or workmanship defects brought to the notice of a promoter within a period of five years from the date of handing over possession must be rectified by the promoter. For delayed possession, developers need to pay an interest rate of 2 percentage points above State Bank of India’s lending rate.

RERA also prescribes imprisonment of up to three years for errant developers. A developer can sell only on the basis of carpet area which will help home buyers understand what they will be paying for each square foot they will get for use.

In the last few years, sluggish economic growth and delays in getting approvals stalled several projects, leaving buyers waiting for their homes and developers holding high debts. It also put a strain on investors such as banks, private equity firms and non-banking financial companies.

Analysts say the real estate sector will be able to attract higher institutional funding as the Act will bring in much desired transparency in the sector, which contributes about 9 percent of India’s gross domestic product, boosting buyer confidence.